SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission file number 33-53250-A
Coventry Industries Corp.
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(Exact name of small business issuer as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0353816
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(IRS Employer Identification No.)
7777 Glades Road, Suite 211, Boca Raton, FL 33434
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(Address of principal executive offices)
561-488-4802
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes (x) No ( ).
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. As of April 30, 1998 the
registrant had issued and outstanding 3,333,855 shares of common stock.
Transitional Small Business Disclosure Format (check one); Yes ( ) No (x)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Page No.
--------
Condensed Consolidated Balance Sheets at
March 31, 1998 (unaudited) and
June 30, 1997 (audited) 2
Condensed Consolidated Statements of Operations
for the three and nine months ended March 31, 1998 and 1997 (unaudited) 3
Condensed Consolidated Statements of Cash Flow for
the six months ended March 31, 1998 and 1997 (unaudited) 4
Notes to the Condensed Consolidated Financial
Statements (Unaudited) 5 - 7
Coventry Industries Corp.
Condensed Consolidated Balance Sheets
March 31, June 30,
1998 1997
------------ ------------
(unaudited) *
Assets
Current Assets
Cash $ 16,033 $ 335,321
Accounts receivable, less $148,300 and $55,442
allowance for doubtful accounts, respectively 1,551,614 1,017,949
Other receivable 319,793 47,678
Inventory 1,942,066 1,888,235
Prepaid expenses 746,914 707,238
------------ ------------
Total current assets 4,576,419 3,996,421
------------ ------------
Property, plant and equipment, less $531,888 and
$324,062 accumulated depreciation, respectively 2,993,980 2,914,731
------------ ------------
Other assets
Excess cost over fair value of assets acquired 3,098,112 2,198,441
Other 139,582 28,330
Prepaid consulting fees 737,499 531,249
------------ ------------
3,975,193 2,758,020
------------ ------------
$ 11,545,593 $ 9,669,172
============ ============
Liabilities and Stockholder's Equity
Current Liabilities
Accounts payable $ 1,227,120 $ 915,630
Accrued expenses 849,200 428,026
Factoring line of credit 291,888 398,858
Income tax payable 58,451 59,030
Current maturities of long-term debt 67,353 234,447
Notes payable 27,958 142,731
------------ ------------
Total current liabilities 2,521,970 2,178,722
------------ ------------
Deferred income taxes 130,000 130,000
Long term debt, less current portion 641,692 575,116
Note payable 481,155 1,150,019
------------ ------------
1,252,847 1,855,135
------------ ------------
Stockholder's Equity
Series A Preferred stock, $.001 par value, 30 shares
authorized, 30 shares issued and outstanding -- --
Series C Preferred stock, $.001 par value, 30,000 shares
authorized, 30 shares issued and outstanding 30 30
Series D Preferred stock, $.001 par value, 1,000,000 shares
authorized, none issued and outstanding -- --
Series E Preferred stock, $.001 par value, 2,000,000 shares
authorized, 115,000 issued and outstanding 115 --
Series F Preferred stock, $.001 par value, 2,000,000 shares
authorized, 75,000 issued and outstanding 75 --
Series G Preferred stock, $.001 par value, 2,500 shares
authorized, 1,250 issued and outstanding 1 --
Common Stock, $.001 par value, 25,000,000 shares
authorized, 2,952,446 and 1,952,934 shares issued and
outstanding, respectively 2,952 1,953
Additional paid-in capital 16,704,396 12,567,700
Stock to be earned (1,316,667) (1,416,667)
Accumulated deficit (7,620,126) (5,517,701)
------------ ------------
Total stockholder's equity 7,770,776 5,635,315
------------ ------------
$ 11,545,593 $ 9,669,172
============ ============
* Condensed from audited financial statements
See accompanying notes to condensed consolidated financial statements
2
Coventry Industries Corp.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Revenues $ 2,570,527 $ 1,238,055 $ 7,766,881 $ 3,586,837
Cost of sales 2,122,368 731,022 6,004,200 2,091,983
----------- ----------- ----------- -----------
Gross profit 448,159 507,033 1,762,681 1,494,854
----------- ----------- ----------- -----------
Operating expenses
Selling, general and administrative expenses 450,098 323,465 2,267,774 639,552
Relocation provision -- 500,000 --
Depreciation and amortization 42,238 35,000 261,412 170,000
Professional fees 100,000 -- 747,471 --
Acquisition and start-up expense -- 1,238,713 -- 1,238,713
----------- ----------- ----------- -----------
592,336 1,597,178 3,776,657 2,048,265
----------- ----------- ----------- -----------
Income (loss) from operations (144,176) (1,090,145) (2,013,975) (553,411)
----------- ----------- ----------- -----------
Other expense
Interest expense (31,413) -- (131,913) --
Interest income 626 -- 3,222 --
Other 27,677 -- 40,241 --
----------- ----------- ----------- -----------
(3,110) -- (88,450) --
----------- ----------- ----------- -----------
Income (loss) before income tax provision (benefit) (147,286) (1,090,145) (2,102,425) (553,411)
Income tax (benefit) 0 (335,000) -- (157,500)
----------- ----------- ----------- -----------
Net income (loss) $ (147,286) $ (755,145) $(2,102,425) $ (395,911)
=========== =========== =========== ===========
Earnings per common share:
Net income (loss) per common share $ (0.05) $ (1.24) $ (0.76) $ (0.65)
=========== =========== =========== ===========
Weighted average shares outstanding 2,828,964 607,713 2,764,280 607,713
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements
3
Coventry Industries Corp.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 1998 and 1997
(Unaudited)
1998 1997
----------- -----------
Operating Activities:
Net income (loss) $(2,102,425) $ (395,911)
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization and depreciation 261,412 170,000
Stock compensation 191,904
Changes in operating assets and liabilities:
(Increase) decrease in receivable (108,552) 25,683
(Increase) decrease in other receivable (198,334) 0
(Increase) decrease in inventory 114,169 (412,679)
(Increase) decrease in other assets (111,252) --
(Increase) decrease in prepaid expenses (39,676) (63,490)
Increase (decrease) in income tax payable -- (197,900)
Increase (decrease) in accounts payable 216,387 (68,700)
Increase (decrease) in accrued expenses 421,082 16,346
----------- -----------
Net cash used in operations (1,355,285) (926,651)
----------- -----------
Investing Activities:
Increase in start up costs -- --
Purchase of property and equipment (114,620) (362,094)
Purchase of assets of a business, net (11,154)
----------- -----------
Net cash used in investing activities (125,774) (362,094)
----------- -----------
Financing Activities:
Payments of long-term debt 378,279 (18,811)
Notes payable, net (669,145) --
Issuance of common stock 1,452,636 467,834
----------- -----------
Net cash provided by (used in) financing activities 1,161,770 449,023
----------- -----------
Net increase (decrease) in cash (319,289) (839,722)
Cash, beginning of the period 335,321 938,487
----------- -----------
Cash, end of the period $ 16,032 $ 98,765
=========== ===========
See accompanying notes to condensed consolidated financial statements
4
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions of Form 10-QSB and
Article 310 of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The preparation requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results may differ from these
estimates. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ended June 30, 1998.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-KSB
for the year ended June 30, 1997 as filed with the Securities and Exchange
Commission.
Note 2 - Stockholder's Equity
Yucatan Holding Company, a Florida corporation ("Yucatan") was the
shareholder of record of an aggregate of 504,891 shares of the Company's
common stock. Of such amount, Jayme Dorrough, the sole officer, director and
shareholder of Yucatan held sole voting and depository power as to 304,891
shares and Ella Chesnutt, a former officer and director of both the Company
and Yucatan, held sole voting and depository power as to the remaining 200,000
shares. On October 22, 1997 the Company repurchased the 304,891 shares of
common stock from Yucatan over which Mrs. Dorrough held voting and depository
power, which represented approximately 11.8% of the then issued and
outstanding common stock for $.25 per share. Following such repurchase, the
shares were returned to the treasury of the Company with the status of
authorized but unissued common stock.
Following such transaction, Mrs. Dorrough, an officer of the Company
and a member of the Board of Directors of the Company, voluntarily resigned
her seat on the Company's Board and from all offices with the Company.
5
On January 16, the Company sold 1,750 shares of its 5% Convertible
Preferred Stock ("Preferred Stock"), at a purchase price of $1,000 per share,
to an unaffiliated third party in a private transaction exempt from
registration under the Securities Act of 1933, as amended (the "Act") in
reliance on Section 4(2) thereof and Regulation D promulgated thereunder. The
designations, rights and preferences of the Preferred Stock, which are
included as Exhibit 3(i) to Item 7.(c) of this Report, generally provide that
(i) the shares of Preferred Stock have no voting rights, (ii) the holders
receive cumulative dividends at the rate of $50 per share per annum, payable
in cash or stock at the Company's option, (iii) in the event of a liquidation,
dissolution or winding up of the Company, the holders receive a liquidation
preference of $1,000 per share of Preferred Stock plus any accrued but unpaid
dividends, and (iv) the shares of Preferred Stock are convertible at the
holder's option into shares of common stock at a conversion price determined
by dividing the liquidation value of $1,000 per share by the conversion price,
i.e., 80% of the average closing bid price of the common stock as report on
The Nasdaq SmallCap Market for the five (5) trading days immediately preceding
the date of conversion. The Company has agreed to register the shares of
Common Stock underlying the Preferred Stock (the "Registerable Securities")
under the Act in a registration statement on Form S-3 to be filed with the
Securities and Exchange Commission (the "Commission") no later than 30 days
from the closing date of the transaction. In the event such registration
statement is not declared effective the Commission within 121 days from the
closing date, the Company is subject to a penalty of 2% of the purchase price
per month until the effectiveness thereof.
The ability of the purchaser to convert the shares of Preferred Stock
is presently limited to a conversion of up to 526,034 shares of common stock,
being a maximum of 19.95% of the Company's currently issued and outstanding
common stock, until such time as the Company's shareholders shall have
approved the issuance of the Registerable Securities. $500,000 of the purchase
price and a certificate for 500 shares of Preferred Stock have been deposited
in escrow by the purchaser with Atlas, Pearlman, Trop & Borkson, P.A., counsel
for the Company, pending such approval. Pursuant to the terms of the private
placement, should the Company obtain shareholder approval, the purchaser shall
acquire an additional 750 shares of Preferred Stock upon the same terms and
conditions. In connection therewith, the Company will hold a special meeting
of its shareholders for the purposes of voting on the approval of the issuance
of the Registerable Securities in excess of 19.95% of the currently issued and
outstanding shares of common stock of the Company.
In connection with this placement, the Company paid the placement
agent a fee equal to 10% of the gross proceeds plus warrants to acquire
125,000 shares of the Company's common stock at an exercise price of $4.36 per
share.
6
Item 2. Management's Discussion and Analysis or Plan or Operation.
The following discussion regarding the Company and its business and
operations contains "forward-looking statements" within the meaning of Private
Securities Litigation Reform Act 1995. Such statements consist of any
statement other than a recitation of historical fact and can be identified by
the use of forward-looking terminology such as "may," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon
or comparable terminology. The reader is cautioned that all forward-looking
statements are necessarily speculative and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward looking statements. The Company does
not have a policy of updating or revising forward-looking statements and thus
it should not be assumed that silence by management of the Company over time
means that actual events are bearing out as estimated in such forward looking
statements.
Results of Operations
Nine months ended March 31, 1998 as compared to nine months ended March 31,
1997
During the nine months ended March 31, 1998 the Company continued its
expansion plans through the acquisitions of LPS Acquisition Corp. ("LPS") and
Apollo Pipe & Value ("Apollo"). Consolidated revenues for the nine months
ended March 31, 1998 increased $4,180,044 or approximately 116% from the nine
months ended March 31, 1997. This increase is attributable to (i) an increase
in revenues generated by the Company's Manufacturing Division, (ii) revenues
for seven months for each of LPS and Apollo, and (iii) three full quarters of
revenues from Federal Supply, Inc. and Federal Fabrication, Inc.
(collectively, "Federal") which were acquired by the Company during the last
quarter of fiscal 1997.
Gross profit margins as a percentage of revenues for the nine months
ended March 31, 1998 decreased approximately 19% from the comparable nine
months in fiscal 1997. The Company's gross profit percentage has decreased
from prior quarters due to the impact of Federal and LPS on the consolidated
group. Historically, Federal and LPS have experienced lower profit margins
than the Company's other subsidiaries in the comparable quarter. Such reduced
gross profit margins have adversely effected the overall profitability of the
Company. Management of the Company does not anticipate a change in the gross
profit margins reported by Federal and LPS as a result of the nature of their
businesses.
7
Operating expenses increased approximately 84% for the nine months
ended March 31, 1998 from the nine months ended March 31, 1997 primarily as a
result of increased selling, general and administrative expenses ("SG&A") and
the inclusion of a $500,000 provision for the current six month period to
provided for anticipated charges associated with the relocation of the LPS
physical plant. SG&A on a consolidated basis increased approximately 254%
during the nine months ended March 31, 1998 from the nine months ended March
31, 1997 as a result of the addition of SG&A expenses attributable to the
inclusion of Federal (approximately $486,000) which was not part of the
consolidated group in the prior period, the continued expansion of the
Company, including SG&A associated with the LPS (approximately $475,000) and
Apollo (approximately $37,000) acquisitions, other ongoing growth of the
Company's operations and one time costs associated with the relocation of the
Company's principal executive offices from Knoxville, Tennessee to Boca Raton,
Florida. Other operating expenses were non-cash items including depreciation
and amortization and professional fees related to current and future expansion
of the Company's operations of approximately $900,000.
The Company reported a net loss of $2,102,045 for the nine months
ended March 31, 1998 as compared to net loss of $395,911 for the nine months
ended March 31, 1997. Approximately $1,600,000 of the net loss is attributable
to non-cash items including depreciation and amortization of
approximately$261,000, a $500,000 provision for the relocation of the LPS
physical plant and approximately $847,000 of costs associated with certain
professional fees. The remaining portion of the net loss is mainly
attributable to operating losses at Federal (approximately $97,000) and LPS
(approximately $635,000).
Manufacturing Division
For the nine months ended March 31, 1998 the Manufacturing Division
reported an increase in revenues of approximately 125% from the nine months
ended Mach 31, 1997. This increase is attributable to (i) revenues from
Federal for three full fiscal quarters, (ii) continued increase in revenues
from both Industrial Fabrication & Repair, Inc. ("IFR") and its subsidiary,
Maintenance Requisition Order Corp. ("MRO"), (iii) revenues from Apollo for
seven months, and (iv) the internal realignment of one of the Company's
subsidiaries, Outside Industrial Services, Inc. ("OIS") from the Staffing
Division to the Manufacturing Divisions (see "Staffing Division" below). The
Manufacturing Division reported income from operations of approximately
$10,000 for the nine months ended March 31,1998; the Company did not report
income from operations for each of its divisions during the comparable period
ended March 31, 1997.
As discussed above, during the nine months ended March 31, 1998
Federal acquired the business and assets of Apollo in a private transaction
from an unaffiliated third party. Apollo is a distributor of industrial pipes,
valves and fittings with annualized revenues of approximately $500,000. Prior
to such acquisition Federal sub-let a portion of its Pompano Beach, Florida
facility to Apollo, which such sublease was negotiated on an arms-length
basis. The principal of Apollo has remained with the company following its
acquisition by Federal to insure both the continued business and operations of
Apollo at current levels as well as to assist in the expansion of Apollo's
operations. Commencing in the second quarter of fiscal 1998, Apollo began the
marketing and sale to industrial manufacturing businesses in the State of
Florida of power transmission components, including new and refurbished gear
boxes in close association with IFR and MRO.
8
Staffing Division
For the nine months ended March 31, 1998 the Staffing Division
reported a decrease in revenues of approximately 29% from the nine months
ended March 31, 1997. The Staffing Division reported a loss from operations of
approximately $30,000 for the nine months ended March 31, 1998 which is
attributable to a concentration of revenues generated from lower margin
accounts; the Company did not report income from operations for each of its
divisions during the comparable period ended March 31, 1997.
During the nine months ended March 31, 1998 the Company undertook an
internal realignment of one of its subsidiaries. OIS, a staffing company which
provides personnel with specialty skills, such as transportation operation and
equipment maintenance, was realigned to fall within the Manufacturing
Division, leaving American Industrial Management, Inc. ("AIM") as the
component of the Staffing Division. As a result of the specialized nature of
the services provided by OIS, coupled with the synergic customer base of IFR
and OIS, management of the Company undertook such realignment to both increase
the operating efficiency of OIS as well as to provide better service to its
customers.
Consumer Products Division
Revenues for the Consumer Products Division increased approximately
1,000% for the nine months ended March 31, 1998 versus the nine months ended
March 31, 1997. This increase reflects revenues from LPS which the Company
acquired in September 1997. LPS revenues are currently annualized at
approximately $2.4 million. The Consumer Products Division reported a loss
from operations of approximately $1,136,000. The loss primarily consists of a
$500,000 provision for to provide for anticipated charges associates with the
physical location of the LPS plant. The Company did not report income from
operations for each of its divisions during the comparable period ended March
31, 1997.
Three months ended December 31, 1997 as compared to three months ended
December 31, 1996
Consolidated revenues for the three months ended March 31, 1998
increased $1,332,472 or approximately 107% from the three months ended March
31, 1997. This increase is attributable to (i) an increase in revenues
generated by the Company's Manufacturing Division, (ii) revenues for three
months for each of LPS and Apollo which were acquired by the Company in the
first quarter of the current fiscal year, and (iii) a full quarter of revenues
from Federal Supply, Inc. and Federal Fabrication, Inc. (collectively,
"Federal") which were acquired by the Company during the last quarter of
fiscal 1997.
Gross profit margins as a percentage of revenues for the three months
ended March 31, 1998 decreased approximately 23% from the comparable quarter
in fiscal 1997.
9
Operating expenses increased approximately 37% for the three months
ended March 31, 1998 from the three months ended March 31, 1997 primarily as a
result of increased selling, general and administrative expenses ("SG&A") and
the inclusion of a $500,000 provision for the current period to provided for
anticipated charges associated with the relocation of the LPS physical plant.
SG&A on a consolidated basis increased approximately 39% during the three
months ended March 31, 1998 from the three months ended March 31, 1997 as a
result of the addition of SG&A expenses attributable to the continued
expansion of the Company, including SG&A associated with the LPS and Apollo
acquisitions and the continued growth of the Company's operations. Other
operating expenses were non-cash items including depreciation and amortization
and professional fees.
The Company reported a net loss of $147,286 for the three months
ended March 31, 1998 as compared to a net loss of $755,145 for the three
months ended March 31, 1997. Approximately $142,000 of the net loss is
attributable to non-cash items, including depreciation and amortization.
Manufacturing Division
For the three months ended March 31, 1998 the Manufacturing Division
reported an increase in revenues of approximately 150% from the three months
ended March 31, 1997. This increase is attributable to (i) revenues from
Federal for a full fiscal quarter, (ii) continued increase in revenues from
both Industrial Fabrication & Repair, Inc. ("IFR") and its subsidiary,
Maintenance Requisition Order Corp. ("MRO"), (iii) revenues from Apollo for a
full fiscal quarter, and (iv) the internal realignment of one of the Company's
subsidiaries, Outside Industrial Services, Inc. ("OIS") from the Staffing
Division to the Manufacturing Divisions (see "Staffing Division" below). The
Manufacturing Division reported a loss from operations of approximately
$109,000 for the three months ended March 31, 1997; the Company did not report
income from operations for each of its divisions during the comparable period
ended March 31, 1997.
Staffing Division
For the three months ended March 31, 1998 the Staffing Division
reported a decrease in revenues of approximately 22% from the three months
ended March 31, 1997. The decrease in revenues can be attributed to the first
quarter of internal realignment of one of the Company's subsidiaries, OIS,
which was realigned to fall within the Manufacturing Division, whose client
base was more synergic to OIS, so as to permit greater operating and
management efficiencies. The remaining subsidiary within the Staffing
Division, AIM, historically reports lower margins than OIS. The Staffing
Division reported a loss from operations of approximately $40,000 for the
three months ended March 31, 1998 which is attributable to a concentration of
revenues generated from lower margin accounts; the Company did not report
income from operations for each of its divisions during the comparable period
ended March 31, 1997.
10
Consumer Products Division
Revenues for the Consumer Products Division increased approximately
600% for the three months ended March 31, 1998 versus the three months ended
March 31, 1997. This increase reflects revenues from LPS which the Company
acquired in September 1997. The Consumer Products Division reported a loss
from operations of $250,000 for the three months ended March 31, 1998. The
Company did not report income from operations for each of its divisions during
the comparable period ended March 31, 1997.
Liquidity and Capital Resources
The Company's working capital at March 31, 1998 was $2,054,472 versus
$1,817,699 at June 30, 1997. The increase in working capital is attributable
to increases in accounts receivable and inventory as a result of the Company's
expanded operations and increased revenues. While the Company does not
presently anticipate any significant capital expenditures (excluding the
relocation provision of $500,000 for LPS), in order to pursue the Company's
plan of operations for fiscal 1998, consisting of its normal business
operations and the modernization of the LPS facility, including the relocation
of the facility to a more suitable locale near its primary customer base and
the addition of a computerized mixing line, it will be necessary for the
Company to raise additional working capital. Accordingly on January 16, 1998
the Company successfully completed a private placement of 1,750 shares of 5%
Convertible Preferred Stock at a purchase price of $1,000 per share, resulting
in gross proceeds of $1,250,000 all as more fully described in Form 8-K filed
on January 29, 1998. $500,000 of the purchase price paid for the 1,750 shares
of 5% Convertible Preferred Stock, as well a certificate for 500 shares of the
5% Convertible Preferred Stock, has been deposited in escrow by the purchaser
pending shareholder approval of the conversion terms of the 5% Convertible
Preferred Stock as same relates to the 500 shares held in escrow and the
additional 750 to be purchased as hereinafter described. Pursuant to the terms
of the private placement, should the Company obtain shareholder approval, the
purchaser will also purchase an additional 750 shares of 5% Convertible
Preferred Stock at $1,000 per share, resulting in additional gross proceeds to
the Company of $1,250,000, including the $500,000 presently held in escrow.
The Company has filed a proxy statement for a special meeting of shareholders
at which the conversion terms of the additional 1,250 shares 5% Convertible
Preferred Stock will be submitted for approval by the Company's shareholders;
however, as of the date hereof the date of the special meeting of shareholders
has not been set. Readers are encouraged to carefully review the preliminary
proxy statement current on file with the Securities and Exchange Commission
(www.sec.gov) for a complete description of the private placement and the
conversion terms of the 5% Convertible Preferred Stock. Assuming approval by
the Company's shareholders, of which there can be no assurance, the gross
proceeds to the Company of an additional $1,250,000 from release of the
escrowed funds and the sale of an additional 750 shares of 5% Convertible
Preferred Stock, together with the funds received to date from the private
placement, will be sufficient to provide for the Company's working capital
needs in during the next 12 months based upon its current plan of operations.
In the event, however, the Company's shareholders do not approve the
conversion terms of the additional 1,250 shares of 5% Convertible Preferred
Stock, or the Company should expand its plan of operations for the next 12
months, the Company will be required to raise additional working capital to
fund it plan of operations for the balance of fiscal 1998. As of the date
hereof, the Company has not identified any alternative sources of working
capital. Additionally, a substantial portion (approximately $2,000,000) of the
Company's property, plant and equipment and accounts receivable are
unencumbered and, accordingly, would provide additional sources of internal
working capital should the Company elect to enter into an asset based lending
arrangement.
11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
On May 1, 1998 the Company determined that it will unwind its
acquisition of 51% of Regenesis Holdings, Inc. acquired from a
shareholder of Regenesis Holdings, Inc. effective January 16, 1998
as the parties involved were unable to fulfill their obligations
under the acquisition agreement. There were no extraordinary
charges associated with the transaction and there is no adverse
effect on the Company as a result of this transaction.
Item 6. Exhibits and Report on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
During the three months ended the Company filed the following Reports on
Form 8-K with the Securities and Exchange Commission:
1. On January 29, 1998 the Company filed a Report on Form 8-K disclosing
under Item 5 information relating to the Private Placement.
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Coventry Industries Corp,
a Florida corporation
Date: May 18, 1998 By: /s/ Robert Hausman
-- ------------------
Robert Hausman,
President
13